Home > FAQ > Business Law FAQ'S > What are the elements of a valid contract?

There are six necessary components of a valid contract. They are:

  • Offer

For there to be a contract, there must be an offer. One party makes an offer to another to initiate the process of entering into a contract. The offer may be verbal or written.

  •  Acceptance

Another party must accept the offer to create a valid contract. They should be clear on the terms and conditions of the offer and accept all of them. If you accept some but not all of the terms of the offer this is a counteroffer. Again, acceptance of an offer or the making of a counteroffer can be verbal or written. If a party makes a counteroffer then the original offer is cancelled and cannot later be accepted unless the party that made that original offer agrees to reinstate it.

  • Consideration

“Consideration” in contractual terms means what the accepting party does in return for the offer. Contracts require an exchange of consideration. It can be payment or the promise to perform another obligation in return. It ensures that the initiating party gets something in return for delivering their offer. 

  • Intention to Create Legal Relations

Both parties are clear that the contract is legally binding and that if contractual terms are not performed by either party, legal action will ensue.  

  • Certainty

Terms and regulations must be made clear and understood by both parties to the contract. Without certainty, the contract would not be valid.

  • Capacity

All parties to a contract must have the legal capacity to enter it. For instance, people under the age of 18 in the UK have no legal capacity to enter into contracts.

Back to previous content
Are there Different Types of Unfair Prejudice? Read More
How To Resolve Conflict Between Managers And Shareholders Read More
What should I do before taking legal action to reclaim debts? Read More